Yes, you can get a mortgage with unpaid collections in 2026 — the specific answer depends on loan type, collection type, dollar amount, and individual lender flexibility. FHA loans allow certain collections under standard automated underwriting thresholds and exclude medical collections entirely. VA loans offer significant flexibility with strong compensating factors. Conventional Fannie Mae and Freddie Mac loans require collections above $5,000 paid off before closing. Non-QM specialty lenders provide the most flexibility, often approving borrowers with substantial unpaid collections when strong equity, cash reserves, or asset-based qualification offset the elevated credit risk on the file.
Buying a home is most people’s goal at some point, and it’s common to have many questions about obtaining a mortgage. Generally, you need to have good credit to get a mortgage with the best rate. But, life happens and sometimes people have black marks on their credit report, such as unpaid collections. What if you try to obtain a mortgage when you have unpaid collections? Keep reading to learn more about your mortgage options.
How Collections Can Affect Getting a Mortgage
A collection account on your credit report can affect the ability to obtain a mortgage in multiple ways. First, an account in collections will drop your credit score, which could make you unable to qualify for many mortgages. For example, many Fannie Mae and Freddie Mac mortgages require a 640 credit score, so you may be too low to qualify. Do not forget that there are FHA loans for bad credit for people with low scores.
If you have had problems paying debts in the last year and want to apply for a mortgage, get a copy of your credit report and see what is listed on there. If your score has taken a major beating, you may want to wait to apply for the mortgage until you pay the collections account or set up a payment plan. The account will stay on the credit report, but trying resolve the matter could make your score go up after time passes.
You don’t necessarily have to pay off the collections to get a mortgage, but it is an option to consider, depending on how much is in collections. Some lenders will allow a small amount in collections (see more about this below).
Another approach is to establish a payment plan with the collections company. Having a plan set up with the creditor could help you get a mortgage with bad credit. This shows you had problems before but are trying to address them now.
Getting a Mortgage With Collections Is Possible
Most mortgage lenders expect to see that you have some debt; most of us do. What is important is the type of debt it is, how much, and whether you make timely payments. They also look for any negative marks on your credit report that suggest you’re a higher risk. Derogatory credit refers to charge-offs and collections.
Charge-offs are old debts that were not collected that the lender writes off. A debt that is 120 days or more overdue for loans and 180 days for credit cards has to be charged off.
Collections refer to unpaid debts that are sent to the lender’s collections team or a collections agency. Collections appear on your credit report and if they remain unpaid, the mortgage lender will notice them. Here are more qualifications for getting a mortgage with collections:
- Conventional Fannie/Freddie mortgage: Collections with more than $5,000 have to paid off before the loan closes.
- VA mortgage: The amount of funds in collection varies. If you have good credit otherwise and only have one or two accounts in collections, you probably don’t have to pay them off before closing the home loan.
- FHA: For standard, automated underwriting, if you have more than $2,000 in collections, you have to pay off the debt or have a payment plan set up. But medical account collections are not counted for mortgage purposes.
- FHA: For manual underwriting, if you have more in collections and a very low credit score, FHA will need to manually review the application. There is a greater chance the FHA loan application could be rejected.
It’s possible to get a home loan with collections on your report. But whether you are approved or not depends on the type of mortgage and other factors. Speak to one of our mortgage lenders today and we’ll determine the best path forward for you to obtain a mortgage.
Any adverse mark on your credit report can have repercussions on your credit score and decrease your likelihood of securing a mortgage. This is particularly pertinent if you have delinquent debts, charged-off accounts, or accounts currently in collections. However, having these derogatory items reported does not automatically disqualify you from obtaining a mortgage.
Paying off collections will update their status to “paid,” but they will still remain on your credit report for the remaining duration of the seven-year reporting period. It’s essential to understand that settling your debts in collections may not result in an immediate significant improvement to your credit score. The negative payment history leading to the collections will continue to weigh down your score.
Can I Get a Mortgage with Tax Liens?
Borrowers frequently ask if they can get approved to finance a house if you owe the IRS? Yes, you can, provided you have an established IRS payment plan. Homebuyers can secure home loan approval even with an existing IRS payment plan, as long as the monthly obligations, including the payment plan, do not surpass 45% of your income dedicated to purchasing a house.
In most scenarios, you will need to resolve judgments and tax liens before becoming eligible for a home loan. As we stated previously, establishing a repayment plan for tax debt may also be an option. For conventional loans, clearing the tax lien is typically necessary for approval. However, with FHA loans, approval might be possible if a repayment plan is arranged and documented in writing and the IRS categorizes the lien as subordinate to the mortgage.
Understand Your Debt-To-Income Ratios
Mortgage lenders view your credit report to understand the major debts you have that could affect your ability to pay. These include collections and charge-offs. Once they see all of your debts, they determined your debt-to-income ratio or DTI. Lenders generally like to see no more than 43% DTI, but lower is better. This is especially true if you have collections on your report.
Lender Rules For Charge Offs
Every mortgage lender has limits for how much money that can be in collections to get a mortgage approved. Many traditional lending companies may not work with you if you have any collections on your report. Fortunately, there are exceptions.
Some lenders may request that you prove that some of what is in collections was paid or you have set up a repayment plan. For instance, some mortgage lenders allow the borrower to have $500 in collections, or $1,000 to $3,000 in medical collections.
Some private and hard money lenders may allow you to qualify for a mortgage with unpaid collections, but you will need to have a significant amount of equity and a low loan to value.
Unpaid Collections Mortgage FAQs
Do medical collections still count against mortgage approval in 2026?
In 2026, medical collections receive substantially more favorable treatment than other collection types across most mortgage programs. Under updated credit bureau rules effective 2022-2023, paid medical collections no longer appear on credit reports, and unpaid medical collections under $500 are excluded from consumer credit reports entirely. FHA underwriting continues to exclude medical collections from standard collection threshold calculations. However, large unpaid medical collections above $500 can still appear on credit reports and may affect FICO scores. Manual underwriting reviews may consider medical collection patterns even when automated systems exclude them. See home purchase loan program comparisons for related program details.
Can non-QM lenders approve a mortgage with substantial unpaid collections today?
Yes, non-QM specialty lenders in 2026 approve mortgages with substantial unpaid collections when borrowers offer strong compensating factors. Non-QM programs designed for credit-challenged borrowers accept unpaid collections that would disqualify conventional and even FHA applications — provided the file includes 20-35% down payment, 6-12 months cash reserves, verifiable income through alternative documentation, and satisfactory explanation of the collection circumstances. Rate premiums typically apply, and specific programs like “recent credit event” mortgages may be available for borrowers with recent collections. See non-QM loan program safety information for related non-QM qualification pathways.
Should I pay off collections before applying for a mortgage or after approval?
The timing of paying off collections depends on your specific situation in 2026. Pay BEFORE applying when: the collection amount is small, you have time to let FICO scores recover (typically 30-60 days), or you’re pursuing conventional financing requiring collections paid at closing. Wait until AFTER approval when: paying now would drain cash reserves needed for down payment/closing costs, or the collection is very old and already factored into your current score. Some lenders require collections paid at closing through settlement, which may be more strategic. See refinance mortgage program options for related credit strategy considerations.
Reviewed by John Tappan NMLS# 394171 | Updated July 2026
References
- Consumer Financial Protection Bureau. (2024). Debt collection: Your rights and what to expect.
- U.S. Department of Housing and Urban Development. (2026). FHA Single Family Housing Policy Handbook 4000.1: Collection accounts.
- Federal Trade Commission. (2024). Fair Debt Collection Practices Act: Consumer information.
